In re Quality Health Care

• Decision Date: 28 July 1997
• Docket Number: Adversary No. 96-6159.,Bankruptcy No. 96-61064
• Citation: 215 BR 543
• Parties: In re QUALITY HEALTH CARE, Debtor. Gordon E. GOUVEIA, Trustee, Plaintiff, v. INTERNAL REVENUE SERVICE of the United States of America, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

215 B.R. 543 (1997)

In re QUALITY HEALTH CARE, Debtor Gordon E. GOUVEIA, Trustee, Plaintiff, v. INTERNAL REVENUE SERVICE of the United States of America, Defendant.

Bankruptcy No. 96-61064, Adversary No. 96-6159.

United States Bankruptcy Court, N.D. Indiana, Hammond Division at Gary.

July 28, 1997.

COPYRIGHT MATERIAL OMITTED

Gordon E. Gouveia, Merrillville, IN, pro se.

Robin Morlock, Asst. U.S. Atty., Dyer, IN, for Defendant.

MEMORANDUM OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT BY UNITED STATES OF AMERICA

KENT LINDQUIST, Chief Judge.

I STATEMENT OF PROCEEDINGS

This Adversary Proceeding came before the Court on a Motion for Summary Judgment filed by the Defendant, United States of America (hereinafter: "U.S.A.") on behalf of its Agency, the Internal Revenue Service, (hereinafter: "IRS") on February 27, 1997.¹

By Order of this Court dated March 10, 1997, Gordon Gouveia, as Plaintiff and the Chapter 7 Trustee (hereinafter: "Trustee") of the Chapter 7 Debtor, Quality Health Care, (hereinafter: "Debtor") was given 30 days to file a Response or Answer to said Motion, and upon so doing the U.S.A. was granted 15 days to file a Reply thereto.

A Response or Answer to said Motion for Summary Judgment was filed by the Trustee on March 27, 1997.

A Reply to said Answer was filed by the U.S.A., the movant, on April 11, 1997.

The Trustee's Complaint filed on September 25, 1996 alleges:

1. Debtor Quality Health Care, Inc., filed its Petition for Relief under Chapter 7 of the United States Bankruptcy Code on May 7, 1996.

2. The Plaintiff, Gordon E. Gouveia, was appointed trustee in the above-entitled action and duly qualified as such on May 7, 1996.

3. That at the time of the filing of the aforesaid bankruptcy proceeding, the Debtor possessed monies in a checking account held with the Calumet National Bank under Account No. XXX-XXX-X.

4. That the Defendant caused a Notice of Levy to be sent to the Calumet National Bank on May 1, 1996, a copy of which is attached hereto and made a part hereof as Exhibit "A".

5. That the Defendant seized the Debtor\'s funds in the aforesaid checking account on May 23, 1996, in the amount of $1,928.01.

6. The funds seized by the Defendant were property of the estate pursuant to 11 U.S.C. Section 541(a)(1), and the action taken by the Defendant occurred postpetition, when the automatic stay was in effect.

7. On August 13, 1996, Plaintiff made a written demand on the Defendant requiring turnover of the aforesaid property. That a copy of Plaintiff\'s correspondence dated August 13, 1996, is attached hereto and made a part hereof as Exhibit "B".

8. The Defendant has failed and refused to deliver the aforesaid property of the estate to the Plaintiff and wrongfully retains possession thereof without right.

The Trustee prayed that the Court enter an Order requiring the U.S.A. to turn over the estate property seized "postpetition", for attorneys fees, costs and other just relief.

The U.S.A. filed an Answer on November 1, 1997, which alleges, in part, as follows:

3. The United States admits that at the time of the filing of the bankruptcy petition, funds were being held in a checking account at Calumet National Bank under the name of the Debtor. The United States lacks sufficient knowledge or information to form an opinion regarding the truth of the remaining allegations contained in paragraph 3.

4. The United States admits that the Internal Revenue Service served a Notice of Levy upon Calumet National Bank, however, the United States further avers that the Notice of Levy was served upon Calumet National Bank on April 30, 1996. The United States denies the remaining allegations of paragraph 4.

5. The United States denied the allegations contained in paragraph 5 and further avers that, on May 23, 1996, the balance of the checking account of Quality Health Care, Inc. in the amount of $1,903.01, held at Calumet National Bank was turned over to the United States by the Bank.

6. To the extent the allegations contained in this paragraph require a legal analysis and seek a legal conclusion, no response is necessary. The United States denies the remaining allegations contained in paragraph 6.

7. The United States admits that Plaintiff made a written demand upon the Internal Revenue Service for turnover of the funds received by the Internal Revenue Service on May 23, 1996, from the Calumet National Bank account on or about August 13, 1996. The United States further admits that a copy of a portion of Plaintiff\'s written demand is attached to the adversary complaint at Exhibit B.

8. The United States admits that the Internal Revenue Service has refused to deliver the funds sent by Calumet National Bank to the Trustee. The United States denies the remaining allegations of paragraph 8.

The Answer also sets out the following Affirmative Defenses:

1. The Court lacks Jurisdiction over the United States because the United States was not properly served with the adversary complaint.²

2. The Internal Revenue Service is not an appropriate party to this action. The only appropriate party is the United States of America.³

3. The adversary complaint fails to state a claim upon which relief can be granted.

4. The Plaintiff is not entitled to turnover of the funds because he has not identified the use for which the funds will be put.

5. The Plaintiff has not established that he can provide adequate protection for the funds for which he seeks turnover.⁴

II

Conclusions of Law and Discussion

A Jurisdiction

No objections were made by the parties to the subject-matter jurisdiction of this Court, and the Court concludes that it has subject matter jurisdiction over this Proceeding pursuant to 28 U.S.C. ? 1334(b), and that this Adversary Proceeding is a core proceeding pursuant to 28 U.S.C. ? 157(b)(2)(E). In addition, notwithstanding the fact that, in its Answer as an affirmative defense, the U.S.A. alleges that this court is without in personam jurisdiction based on the alleged improper service of the Complaint by the Trustee upon it, the Court concludes that it has in personam jurisdiction over the U.S.A. as service of the Complaint and Summons upon the U.S.A. appears to fully comport with the requirements of Fed.R.Bk.P. 7004(b)(4) and (5), and was not raised by the U.S.A. in its Motion for Summary Judgment. However, as observed in footnote 2, the U.S.A. is correct as to its Second Affirmative Defense as the Internal Revenue Service is not a proper party defendant. Nevertheless, the U.S.A. did not address this issue in its Motion for Summary Judgment, and proceeded to argue the case on the merits. As a condition of any final order entered in this Adversary Proceeding, the Trustee will be required to amend his Complaint to name the U.S.A. as the proper party defendant.

B General Principles Relating to Summary Judgment

Under Rule 56(c) Fed.R.Civ.P., as made applicable by Fed.R.Bk.P. 7056, summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). The inquiry that the court must make is whether the evidence presents a sufficient disagreement to require trial or whether one party must prevail as a matter of law. Anderson, 477 U.S. at 251-252, 106 S.Ct. at 2511-12.

The moving party bears the burden of showing that there is an absence of evidence to support the nonmovant's case. Celotex Corp. v. Catrett, 477 U.S. at 325-27, 106 S.Ct. at 2554, supra. Stated differently, the moving party, in making a motion for summary judgment, "has the burden of establishing the lack of a genuine issue of material fact." Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984); Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984).

Federal Rule of Civil Procedure 56(e) provides in part as follows:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party\'s pleading, but the adverse party\'s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

When a motion for summary judgment is made and supported by the movant, Fed. R.Civ.P. 56(e) requires the non-moving party to set forth specific facts demonstrate that genuine issues of fact remain for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. at 584-86, 106 S.Ct. at 1355, supra. Accordingly, once a moving party has met its initial burden, the opposing party must "set forth specific facts showing that there in a genuine issue for trial" and that the disputed fact is material. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983), cert. den., 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). Thus, if the movant carries his initial burden, the opposing party may not defeat the motion by merely relying on the allegations or denials in its pleadings. Rather, its response must set forth in the required filings specific facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. See also, First National Bank v. Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Scherer v. Rockwell International Corp., 975 F.2d 356,...